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National Commercial Banks are on the one hand buying huge amount of dollar from Bangladesh Bank mostly to pay for government project costs while on the other are lending heavily to government as revenue collection slumps sharply due to coronavirus pandemic.
Novel coronavirus pandemic has brought international transaction concerning import-export ground to a halt. Flow of remittance has reduced significantly. Purchase and selling of foreign currency has also slumped sharply. But expenses incurred in the mega projects of the government is making hole in foreign currency reserve. As purchase of dollar has reduced, commercial banks are purchasing the same from the Bangladesh Bank for meeting expenses of the mega projects. As on yesterday, the BB sold around $78 crore majority of which has been expensed in the government projects. Meanwhile, due to huge reduction in revenue collection, the government is taking more and more loans from the banks.
Sources in the Bangladesh Bank said, only state-owned Sonali and Agrani banks have bought $2 crore 50 lakh yesterday (Monday) for paying off the bills on purchasing machineries for Rooppur Nuclear Power Plant. Until yesterday, the BB sold $78 crore in this fiscal year majority of which have been bought by the state-owned banks for meeting expenses in the government projects. Tk 6 thousand 630 crore from these banks have landed in vault of the central bank as a result of the dollar purchase. When a dollar is sold currency goes to the central bank squeezing supply of currency in circulation.
Managing Director (MD) of Sonali Bank Md. Ataur Rahman said, his bank is not facing any crisis of dollar. However, there is opportunity to pay off bills of government projects like Rooppur Nuclear Power Plant through opening Letter of Credit and submitting them to BB.
Meanwhile, the government is increasing margin of bank loan in order to meet local expenses. Until April 30, the government has taken loans amounting to Tk 58 thousand crore from the banks. In the annual budget of this fiscal year the target for taking loans from the banks was Tk 47 thousand crore for meeting the deficit but due to rise in the demand for loans it has been learnt that the target will be revised to an amount of Tk 78 thousand crore.
Executive Director of Policy Research Institute (PRI) Dr Ahsan H Mansur has said that as both import and export have been scaled down due to coronavirus pandemic, everything is under control. However, bills of megaprojects like Padma Bridge, Rooppur and Rampal have to be paid off. Though majority of the funds for the projects are coming from abroad the central bank has to sell dollar to local banks whenever needs be.
He also said that foreign currency reserve is satisfactory so far so good but there will be challenges including meeting expenses of the government projects and paying off foreign loans and along with their interest.
It may be mentioned here that the banks were not required to purchase dollars for many years until the onset of coronavirus spread. On the contrary the commercial banks used to sell dollar to the central bank as the banks had sufficient foreign currencies due to stable export and flow of remittance.
Globally trading has been stopped due to lockdown imposed to stem the spread of coronavirus. Until April 2020, income from export has reduced by 83 percent to $52 crore which was $303 crore in April 2019. On the other hand, in the 17 days of May the amount of remittance received was 87 crore dollar which is 10 percent less than the last fiscal year. During this period expense of foreign currency was not much. In April Letter of Credit (LC) amounting to $160 crore were opened which is 268 percent less than (i.e. 526 crore dollar) in the same month of the previous year.
There is not much pressure on the reserve as import and export nosedived and flow of remittance squeezed. The amount of forex reserve has been reduced to $32 billion from $33 billion in the first week of the current month after Asian Clearing Union (ACU) payments of $85 crore.
Yesterday, upon receipt of $25 crore from the Asian Development Bank (ADB) forex reserve of Bangladesh reached the $33-billion marked again. The reserve was $32.90 billion on the closure of business yesterday. It may be mentioned that the amount of bill incurred by Bangladesh is the lowest in the last six years as far as import-export activities with the nine countries came to a halt. Bangladesh mainly imports huge amount of things from these nine countries.
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